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$82 Bucks a Barrel

FM2436

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I'm surprised there hasn't been any discussion about the fact that Oil closed above $82.00 a barrel yesterday. Forecasts are oil will continue a rapid increase as interest rates were dropped which analysts expect will increase even more the demands for oil and gas. I hope US Airways is prepared. One could easily foresee future reduction, if not outright elimination, of lower and non-profitable markets.

http://news.yahoo.com/s/ap/20070919/ap_on_...e/oil_prices_56
 
I tried to start a thread about this and the general shape of the economy yesterday and it was moved to the Water Cooler. There is nothing more relevant to LCC than oil and the upcoming recession.

What is interesting about the intrest rate cut is that it is helping to keep the dollar in free-fall, not just the obvious effect of keeping us spending more money. Oil is sold in US dollars all around the world. Thus, it is cheaper for China, India and Europe to buy oil because of the currancy float, but it is much more expensive for us.
 
I tried to start a thread about this and the general shape of the economy yesterday and it was moved to the Water Cooler. There is nothing more relevant to LCC than oil and the upcoming recession.

What is interesting about the intrest rate cut is that it is helping to keep the dollar in free-fall, not just the obvious effect of keeping us spending more money. Oil is sold in US dollars all around the world. Thus, it is cheaper for China, India and Europe to buy oil because of the currancy float, but it is much more expensive for us.

The flipside is that our enormous debt becomes cheaper to repay. The US government is the world's largest debtor so I suppose it's not a coincidence that the Fed and the powers that be have chosen a course that trashes the dollar's value. The problem for the people, as you mentioned above, is that the cost of living skyrockets. I'm afraid we haven't seen anything yet as to inflation. If anyone thinks 80 dollar oil, $8.50 wheat, and $730 gold is expensive, well you haven't seen anything yet. The misery of living with a vaporizing dollar is just beginning. Unfortunately, our children will be paying the real price for the economic sins of the 90s and 00s.
 
Aquagreen73s, Amen, It is a purely political policy to devalue the dollar (and both sides of ailse want it to fall in value). The national government is adding liquidity (printing money) to the economy nearly every week. This "fiat" money is worth-less and will lead to hyper-inflation down the road, just as you say. I am not so sure it will wait until our kids are in a position to pay up, I think the day of rekoning is coming very soon.

Here is an interesting article out today: http://biz.yahoo.com/ap/070919/debt_limit.html?.v=2
 
Aquagreen73s, Amen, It is a purely political policy to devalue the dollar (and both sides of ailse want it to fall in value). The national government is adding liquidity (printing money) to the economy nearly every week. This "fiat" money is worth-less and will lead to hyper-inflation down the road, just as you say. I am not so sure it will wait until our kids are in a position to pay up, I think the day of rekoning is coming very soon.

Here is an interesting article out today: http://biz.yahoo.com/ap/070919/debt_limit.html?.v=2

I too think the economic day of reckoning is close at hand; the kids will have the burden of rebuilding which will take several generations. This isn't really a surprise seeing how we've lost our moral compass in every institution that matters: banking, politics, our communities, schools, and even our religous institutions. Look no further than the "leadership" in the airline business - decisions are dictated by what is best for Wall Street and Wall Street operates on a principle that whatever nets the greatest end of year bonus is what qualifies as a "worthy investment." We are a completely lost nation.

But to keep the topic more focused to the airline discussion, I think what is happening macroeconomically will have significantly greater effects upon East and West pilots than the arbitration or the collective bargaining contract. The United States has been run off an economic cliff and it's been done in a manner that will take generations to rebuild. Show me somewhere before in our history that resembles in any way the widespread illusory mortgage finance scheme or the dot com schemes... Past excesses were nothing compared to what has been allowed to ferment over the past decade. The recent actions of the Fed is just a futile attempt to keep the balloon inflated with whatever hot air it can muster. If it means burning dollars, then they will and they are doing it.
 
It was moved because it is applicable to all airlines, and the economy in general. Oil prices are not exclusive to US Airways alone.

This topic belongs in the water cooler as well, but I will let it sit here for a while and see what happens. If the discussion stays on the general effect on airlines and the economy it will be moved again.

Thank you.
 
Doesn't the company simply add a "fuel surcharge" to tickets?
Not domestically that I know of, other than the freight carriers. Some airlines do add a fuel surcharge internationally, but I'm not sure if US does.

On the fuel prices, and to bring it specifically to US, there's the old good news and bad news.....

The good news is that the hedges in place (at least as of the end of the 2nd quarter) are all in the money at these oil prices.

The bad news is that those hedges won't offset the full increase in fuel prices.

Jim
 
I'm afraid that the non-hub/small community airports and the US Airways Express system (and the entire regional airline system in general) will take the brunt of these Oil and newly raised fuel taxes increases by significantly lowering service if not out-right elimination of of lower and non-profitable markets.

Many may not be aware, but on Tuesday the US House Ways and Means Committee passed new federal excise taxes that would increase the general aviation (GA) jet fuel tax from 21.8 cents to 35.9 cents per gallon and increase the GA gas tax from 19.3 cents to 24.1 cents per gallon. Thats a 65% and 25%increase in fuel sales to general aviation. And apparently, the airline industry is try to avoid a similar increase by proposing an added fixed domestic departure tax and a variable distance tax.

http://www.aaae.org/government/125_AAAE_Ai...ml?Alert_ID=893

As ticket costs will rise, passengers originating from smaller (hub connecting markets), who purchase ticket far enough in advance to take advantage of the commonly lower fairs, are going to become without options simply because airlines, with regional partners/WO's like US Airways, are not going to be willing to use mainline revenues to susidize those non-hub markets that require multiple aircraft and personnel to connect them to Orlando to see Mickey Mouse.

I have always wondered, in close market pairings like Ithaca, Elmira, and Binghamton NY, or Huntington, Charleston, Lewisburg, Beckley, and Bluefield WV, or even Lynchburg and Roanoke VA, why US Airways doesn't reduce it's presence and serve that/those regions though one airport like Binghamton NY, Charleston WV, and Roanoke VA. In 2005, there were only 401 airports that enplaned more than 10,000 annual passengers, and a large percentage of those 401 enplaned fewer than 50,000 passengers.

In four years, the regional airline industry and scheduled airline service into rural America is going to look very different than it does today.
 
Today the price of oil per barrel is in a runaway, up $2.07 at 1447EDT. We may loath the day the Fed cut rates by 50 basis points. Does anyone know the hedge position of LCC for this quarter?

It looks like the price backed off a little at the close, however, it is still up $1.37.
 
I have always wondered, in close market pairings like Ithaca, Elmira, and Binghamton NY, or Huntington, Charleston, Lewisburg, Beckley, and Bluefield WV, or even Lynchburg and Roanoke VA, why US Airways doesn't reduce it's presence and serve that/those regions though one airport like Binghamton NY, Charleston WV, and Roanoke VA. In 2005, there were only 401 airports that enplaned more than 10,000 annual passengers, and a large percentage of those 401 enplaned fewer than 50,000 passengers.

In four years, the regional airline industry and scheduled airline service into rural America is going to look very different than it does today.
Beckley, and Bluefield WV I believe are EAS cities and if I am correct and they are the flights are subsidized by the goverment.
 
Ahhhhh remember when the pilot group was called "PROFIT MANAGERS"----at $82 would seem like a good idea to get the main profit center pilots onboard.
 
Today the price of oil per barrel is in a runaway, up $2.07 at 1447EDT. We may loath the day the Fed cut rates by 50 basis points. Does anyone know the hedge position of LCC for this quarter?

It looks like the price backed off a little at the close, however, it is still up $1.37.
Shell is shutting down it's wells in the Gulf and evacuating the personnel due to the possibility of a tropical storm developing. They produce 28% of Gulf oil.

Article

Jim
 
Not domestically that I know of, other than the freight carriers. Some airlines do add a fuel surcharge internationally, but I'm not sure if US does.

Jim

US fuel surcharge is sixty-cents per kg for international shipments, the industry standard. The amusing fact is that the freight rate may only be thirty-cents per kg.

How funny would it be to advise passengers "your airfare is only $100 but we have to add $200 for fuel to your fare".

Sidebar: with oil over $80barrel and UA's reorganized business plan based on oil at $50barrel thru 2010 --- how long before the fat lady sings again for our good friends from Elk Grove Village?? :mf_boff:
 

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